Banking Ombudsman Judy Chang is clear as to what her job is. “The banking ombudsman is not a watchdog for the banking industry,” she says; “It is not about setting standards and pulling up the industry in any way.” She insists that the banking ombudsman will serve as a mediator between the bank and the customer. The Office of the Banking Services Ombudsman (BSO) was opened last week Monday at the Central Bank without much fanfare and the expected barrage of complaints. Her only boss is Central Bank Governor, Ewart Williams, and dismisses the view that she is obligated to the banks. Chang’s  appointment came into effect on May 1 after serving as chairman of the Trinidad and Tobago Unit Trust Corporation (UTC) for five years. Chang’s role as banking ombudsman involves investigating complaints from individual and small businesses with respect to financial services that banks provide. Although no formal legislation is in place, six commercial banks have volunteered to help the banking ombudsman. These include Citibank, First Citizens Bank (FCB), Intercommercial Bank, RBTT Bank, Republic Bank, and Scotiabank.

According to Chang, before a complaint reaches the office of the BSO it must first be lodged at the bank in question. “The process must start from the bank,” she said. She explained that if the disgruntled customer is not satisfied with the bank’s response to the matter after a period of two months, then they can lodge a complaint with the banking ombudsman and then it will be investigated. The banks have been dealing with complaints for the past two years, noted Chang, stressing that under the Code of Banking Practice banks have agreed to deal with complaints and other disputes customers may have with the banks. “We just provide another avenue for people who are not satisfied with the recommendations they receive from the banks,” she said. However, there are some limitations to the types of complaints that Chang will investigate. The complaint must not be related to the banks’ general interest rate and risk policies or pricing of products and services. “You cannot come to me and say that the interest charged by this bank is more than what they should charge because as I see it when you have a relationship with a bank it is a contractual relationship.

“You should be told everything about the transaction up-front and you should be fully aware of what you are getting into and it is something you have to abide by.” If, however, the customer is not told at the beginning of the agreement what the rate is, Chang said her office will take a look.  “But to say that the rate charge at the beginning is too high or that the banks want to price a product and charge a certain finance fee, we do not get into that area because we leave that to competitive forces between banks.” Once a customer’s complaint meets the required specifications, they are asked to fill out a form which they can get at the ground floor of the Central Bank and then Chang will start her investigations. “Sometimes there are two and three sides to a story. So a customer can tell me one thing but I also need to find out the banks’ side and then marry the two,” she said. Citing experiences from other ombudsman services, Chang said her investigations should not take more than three months and depends on how far apart the parties are and what are the complaints. “Some of them might be straightforward, others we may need to get information about the bank. We are an impartial party trying to ensure that both parties are at one at the end of the day.” Chang added that the banks do not have to agree with her recommendations and can opt out of the whole system or even take the matter to court. “This is not a court of law, it is a process to get two parties together, and it is relatively simple and informal, taking into consideration the overall trend is fairness and equity.”

She noted though that currently there are not many complaints and those that they have received may or may not meet the criteria that was set out. She said she will analyse each one and respond to them accordingly. “Business is slow right now so maybe that is a good sign that there aren’t many complaints.” However, Chang does expect things to pick up as people become more aware of the banking ombudsman and the services that are offered, free of charge. She added that while this is the first time that a banking ombudsman has been appointed in TT, she does not think that it is that overdue citing the Canadian ombudsman who has been around for only five or six years ago. She added that while this job is a heavy responsibility, she is honoured to be considered for the post. “I retired once before and again I am being called to work again.” A chartered accountant by profession, she retired from PricewaterhouseCoopers about seven years ago and then took up the position of chairman at UTC. She noted though, that her stint at UTC was not a full time post, but the position of banking ombudsman is definitely full time. “This job is putting me back to work,” she said and was all for the idea of “providing the man in the street with another avenue to deal with the banking business.” At the end of the day, she hopes that her job will lend more credibility to the banking system.   

THE USE of obscene language in the workplace, especially within earshot of customers, can cost you your job. In stressing this point, the Industrial Court said the use of obscene language was anathema, and should on no account be encouraged. The Court made the point in a judgment it delivered arising from a dispute between the establishment called the “Parrott” and one of its employees, Kureen Charles. The Parrott is owned by Winston Siriram, former Mayor of Chaguanas.  Kureen Charles was fired by the Parrott for using obscene language to a customer and the court’s task was to find out whether the dismissal was in keeping with good industrial relations practices. Both the union and the employer agreed that Charles was dismissed because she used obscene language towards a customer, during working hours. The union submitted though that Charles was physically assaulted and provoked into doing so by the customer.

But the Court found that the worker was in the habit of using obscene language at any time, regardless of the situation. As a result, it did not believe that provocation was the cause in this instance. The Court found that the Parrott failed to present any evidence to show that the worker used obscene language. In her testimony, Charles admitted that she did engage in the use of obscene language. But what the Court found that the union did not proffer provocation for the use of such language. In its judgment, the Court commented: “This company was part of the service provided to its customers for its existence, and the use of obscene language was not in the best interest of such a business. “Workers so employed, should not abuse customers in any manner, since the customers eventually pay their wage” said the Court. It also agreed that if it were to quash the dismissal of the worker, workers in this type of industry, would be of the opinion that it would be in order and alright to use obscene language towards customers. Accordingly, the court said, the dismissal of the worker was neither harsh nor oppressive, and was in keeping with good industrial relations principles and practices and should be upheld The Court comprised H Soverall and S Maharaj. Charles was represented by the Communication Workers’ Union.  

From regional integration and the Caribbean Single Market and Economy (CSME) to Liat and predatory pricing, Prime Minister of St Vincent and the Grenadines, Dr Ralph Gonsalves, tried knocking some sense into those attending a recent seminar hosted by the TT Chamber of Industry and Commerce. On the issue of globalisation, he puts things in perspective. “It is trite for us to speak about globalisation and more particularly about what it is in our own area — modern globalisation.” Modern globalisation has certain distinct characteristics, he went on to note. These include the rapid movement of large sums of finance capital across national boundaries as well as the spread of information technology and the easy availability of information. This is closely linked to the fact that the modern society is increasingly a knowledge-based society. He drew reference to the move towards trade liberalisation as a universal phenomenon. “What is to be our overall strategic response to the phenomenon of globalisation?” he asked the packed auditorium. The Caribbean Single Market and Economy (CSME) can be considered as a  strategic response to globalisation at the regional level, Gonsalves said. However, he lamented that the political apparatus of Caricom was in a “ramshackle condition” and therefore unable to meet the new, deepening economic space being created by the CSME.

Gonsalves severely criticised the private sector for the role it has played in what he termed the “slow move towards the CSME” and what was critical of the way trade negotiations were being handled. He said, “The simple fact is that by and large, the private sector in the Caribbean is unprepared for the CSME and the Free Trade Area of the Americas (FTAA).” “There is no real and thorough understanding as to what is required,” he went on, adding that companies and the private sector, not governments, are at a stage where they are negotiating the textual language of the FTAA. “You are the ones who know about which commodities you need, the particular kinds of leverage and protection for any transitional period, as well as the meaning which should be given to the practical terms for special and differential treatment, not only for countries, but for commodities.” This, he said, is not something which the regional governments know a great deal about and they need to have the private sector input.

On  a single regional carrier that could be an integral part of the Caribbean’s future, Gonsalves referred to an April 14 meeting of the Caricom Quasi-Cabinet for Regional Transport which was held in Barbados. “This is not to actually bring about a single airline but rather to give us a plan which we can then assess,” he maintained. “You can’t have a community unless you have communication. So it is of strategic importance if you are having a CSME to have communication.” And one of the principle forms of communication is air transport, he went on, adding, “once you see the issue in large terms, the small quarrels we are having about Liat and BWIA fall into place.” Liat, it was revealed, has incurred a debt of approximately EC $200 million. A significant portion of this money is owed in landing fees. In this light, Gonsalves took the view that it was cheaper to keep Liat in the air rather than to close it. He further went on to say that Liat required financing for the period April to June to the tune of EC$25 million. The government of St Vincent and the Grenadines, which possesses a 10.1 percent market share in the airline, put in EC$2.5 million, because of its interest in increasing its share holding. It has asked that this contribution be put towards its share holding.

Likewise, the government of Grenada, which has a market share of 1.4 percent, has donated $300,000. The TT government, Gonsalves said, has provided a line of credit of $12.5 million at zero percent interest with a moratorium of five years. “In the context of a single airline, whatever form it comes in, the government of St Vincent is prepared to be a shareholder in that entity,” he pledged. Responding to why he refuses to allow Liat to fall on its own weight and have the competitors take up the slack, Gonsalves replied, “I don’t know of any civilisation anywhere in the world, where the people allow others to exclusively control air transport.” He criticised what he called persons who came into the region with “deep pockets” and who engaged themselves in predatory pricing to run particular airlines into the ground. If there is predatory pricing to push business out of the market place, and in the case of Liat, out of the sky, it can be guaranteed that when a monopoly exists the prices will rise again sharply to regroup for the period when predatory pricing was the tactic being used. “Others can go for that model,” he asserted, “but St Vincent and the Grenadines, while we are happy to see other competitors in the sky, will be supportive of Liat. “We want to see a regime put in place which does not allow predatory pricing and ensures fair competition.” “This is the only way that as a civilised people we can move forward and be assured that we can be carried from one island to another. You never miss the water till the well runs dry,” he said.    

Acting Comptroller of the Customs and Excise Division, Ralph Newton, has made it clear that change is not going to come easy. The establishment of the Caribbean Single Market and Economy (CSME) will undoubtably have serious implications for the local customs and excise division, said Newton. He was speaking at the “Getting it right with Customs” seminar organised by the TT Manufacturers Association (TTMA) last week. Newton also noted that under the CSME, a practicing customs broker from another country may be able to come to TT and establish a practice here. “The person who is practicing in St Lucia for example, within the framework of the operation may be able to lay claim to the fact that he is on par with our person. This then leads to competition and competition is healthy,” Newton said. He stressed the need for a complete reconstructing of the customs and excise division. “Transformation is the new order within which the framework of customs and excise will be operating in the next five to ten years,” he said, adding that the division had already begun talking to  the US Customs services.

He explained that transforming the division would involve elaborate reforming, restructuring, re-engineering and repooling of policies, systems, procedures, operations and processes. “The road is a long and difficult one,” Newton asserted. He went on to note that in this “hand holding exercise” with local manufacturers, they were looking at forging links on both sides. Customs has traditionally been accused of walking the road alone, he said, adding that it was looking towards promoting reforms and compliance. Newton slammed manufacturers for laying what he referred to as the foundation for the compromising of the integrity of the division. “I would know where the integrity of my division and my officers is being compromised,” he maintained, “and I think you are responsible. “If you do not act responsibly, my division will be hard pressed to be able to pull up its boot straps and operate within anti-corruption initiatives in order to firmly walk the road of integrity,” he said. He called for the resurgence of the mercantile committee, which he stressed was an important factor in the division’s transformation process.     

Q&A with CMMB Securities

Q. I have several outstanding loans I am paying off and I’m also putting aside about $250 a month. I was wondering if it would be better for me to forget the savings for a year or so and just deal with paying off my debts, especially the credit cards.
Nirissa, Point Fortin

A. The interest rates on loans, especially credit card facilities, are extremely high when compared to the rates of return earned on savings instruments. Therefore the rate earned on the extra $250 you set aside to savings every month is much lower than the interest cost paid on the $250 in debt you keep on your credit card per month. Your current arrangement does not make economic sense as you are in effect eating away at the value of your wealth. It is tantamount to your borrowing $250 every month from your credit card to fund your $250 in savings per month. The growth of your money is determined by your net worth, that is, the difference between your assets and your liabilities. If you have loans that are costing you about 12 percent per year, paying them off is like finding an investment with a guaranteed return of 12 percent. Let us work out the dollar value effect of the two options on each $250 set aside and prove that paying down debt would be better. Assume that you pay 24% per annum on you credit card debt while you earn 6% on your savings in a Money Market account. Annually, you pay an interest cost of $60 while you earn $15 on your savings. Therefore by saving rather than paying down debt you save yourself $15 per year on every $250. However, if you pay down debt every month then you remove the $60 interest cost altogether. Therefore from an economic point of view it is better to pay down debt rather than putting aside for savings. If you need funds on short notice for an emergency you can always drawback down on your overdraft or credit card.

Q. I’ve been hearing a lot about the futures market. What is it?
Stanley, Tunapuna

A. The futures market is conceptually a place where an investor can arrange to buy or sell something at a specified date in the future and at a price agreed upon today. There are futures markets for commodities as well as financial instruments. There are many different types of commodities that can be traded including wheat, oil, soyabeans, corn, silver, etc. Similarly futures contracts on financial instruments such as equities, Eurodollar deposits, and indices are available. Futures contracts can be extremely useful. For example, if a producer of wheat is going to have a certain quantity of production to sell in three months time but thinks that the price may fall over that time, he can get into a contract to sell at the futures price agreed upon today. In this way the producer hedges the risk of the price he gets for his produce. On the other hand, the purchaser of wheat may think that the price of wheat may rise and in order to avoid paying a higher cost can also hedge this risk by arranging to purchase wheat at a specified future date and price. The financial markets also have such hedging facilities. For example, if a mutual fund manager has to pay a distribution in six months, but feels over this time the prices of shares in his portfolio may fall, he can hedge the prices of the shares falling by arranging to sell these in the future at prices agreed upon today. This sounds all well and good, but remember nothing comes for free. The opportunity cost in a futures contract is if the price of the commodity or financial instrument moves in the opposite direction to what was anticipated. Let’s say the wheat producer arranges to sell at the futures price, but the spot price at the time of settlement is higher than what was expected, then the producer loses the opportunity to sell at the higher price. The producer may prefer incurring this opportunity cost rather than selling at a lower price.

Q. I read in the press that Trinidad and Tobago recently got an upgrade by Standard & Poor’s. What does this mean?
Kay, Scarborough

A. Standard & Poor’s is a recognised credit rating agency whose job is to assess the risk of investing in different countries and companies. They have developed a hierarchy of ratings — the higher the rating assigned the lower is the risk of investing. Recently Trinidad and Tobago’s long-term foreign currency rating (the ability to pay back long term foreign debt) was upgraded one notch from BBB minus to BBB. This means that Trinidad is now in a higher rating class than before. This improvement in its risk rating means that international investors would now be even more comfortable about investing in this country as the risk is now perceived as lower. The reason for this upgrade is the fact that the country’s economic indicators have been consistently improving. The international reserve position is high and the foreign debt load and debt servicing levels have been falling. A direct consequence of this is that Government (if it wants to) would be able to borrow on the international market at a lower interest rate than before the upgrade, since the risk of investing is now lower. Questions can be sent to: PO Box 1830, Wrightson Road, Port-of-Spain.
Email: cmmbsecurities@mycmmb.com    

TRINIDAD and Tobago, the Caricom states and the Western Hemisphere are well advanced in the process of creating new multilateral trade and marketing arrangements that are likely to impact dynamically on all countries this side of the globe. We are referring, of course, to the establishment of the Caricom Single Market and Economy and the Free Trade of the Americas Agreement. While these movements relate essentially to economic relationships, it is inevitable that they will have not only an effect on our society, but also demand from our people a deeper understanding of the nature of the changes, the new challenges they impose and, perhaps most crucially, the attitude we must adopt towards them for our own survival. If, to begin with, there is one basic statement we can make about them it is this: Trinidad and Tobago, together with all the countries in the hemisphere, will be entering the brutally competitive arena of free trade which would require from us, if nothing else, a conscious effort at increasing productivity. The reality we must face is that the CSME and even more so the FTAA will be something of a two-edged sword. Mr Anthony Hosang, president of the TT Manufacturers’ Association, puts it this way: “If producers manufacture goods that can take advantage of the FTAA, we will enjoy tremendous opportunities.” “However, if our products fall short in any way, we are in danger of seeing our businesses disappear.” Although Trinidad and Tobago can boast of having the most industrialised economy in the Caribbean region, and although we have been enjoying the best of the Caricom arrangement, we can hardly be complacent in the face of these new challenges.

How the economy will eventually adjust is left to be seen but it seems logical to expect that companies and manufacturers, in the quest for higher levels of productivity, may have to rely more heavily on technology rather than labour. This enforced sophistication of the economy must raise the prospect of TT being saddled with an even larger segment of unskilled and virtually unemployable persons, a somewhat disturbing eventuality in light of the social conditions that may ensue when the CSME comes into operation. Up to now, none of the ardent proponents of the CSME has taken the trouble to explain to the country exactly what is involved in this evolutionary step. Leaders of the business community have been extolling the benefits which the private sector is expected to derive from this new arrangement, but the public at large remains quite ignorant of how the removal of all existing restrictions to the free movement of goods, services, capital and labour will impact upon them and the society as a whole. In particular, what does the free movement of labour mean? Will companies have the right to bring in workers from other countries of the Caribbean to work here? Will the CSME result in an influx of cheap labour into TT, aggravating the country’s unemployment problem and overloading its social services? It may be easy for us to understand and accept the absolutely free movement of goods and capital and even services among the countries of the region, but the free movement of labour? Maybe these fears are ill-founded, but the fact remains that nobody involved in the formation and implementation of these new arrangements is seeing the need to explain to the country at large exactly what is involved in these treaties and what should be the national response to them. Inspite of all the glowing rhetoric about their potential benefits, it seems the CSME and the FTAA will come upon us like a thief in the night.